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relliott22 t1_j72q96m wrote

Reply to comment by Splime in State lawmakers introduce bill to bring back rent control by HRJafael

Or you're just misunderstanding the nature of the problem. High prices aren't the problem. High prices are a symptom of insufficient supply, which is the real problem. If you want to leverage government policy to fix the problem, attack the insufficient supply instead of attacking the high price. If you create subsidies or tax breaks for people building the type of housing you want to see built (in Boston that would be high density, small and medium sized apartments), this will alleviate the problem of high prices.

If there is an emergency (such as a 50-100% surge in rents due to a global pandemic), then price controls can be used as an emergency measure, so long as they are explicitly stated as emergency measures and capped by an appropriate time limit. If you don't do that you risk spooking builders and exacerbating the supply problem.

Price controls aren't a minor piece of basic decency, price controls are drastic market interventions. The whole point of a market is price discovery. What is the proper price for a 1 bedroom apartment in Boston? You don't know the answer to that. Neither do I. Neither does anyone in this thread or in the government or in the whole wide world. The only way to arrive at the correct answer to that question is to establish a free and fair market and let the market discover the price. That is the essential function of every market for every good, and we judge how well a market is functioning by how efficiently it arrives at that equilibrium price. A price control destroys this utterly. So that's why a price control would break the market, because that's what price controls do. It is not somehow the market's fault.

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Splime t1_j72yt7s wrote

I mean, I thought I was pretty clear above that insufficient supply is the much larger problem, but if you want to claim I'm "misunderstanding" then go ahead I guess.

The thing is, high prices may not be "the problem", but they are very much a huge problem in and of themselves. I would go as far as to say that yes, these prices combined with a lack of supply are in fact an emergency. High prices for housing are highly correlated with homelessness, and a free market will never find a profitable way to supply decent housing to the homeless. Even if sufficient construction brings prices down for most people, they're still getting left behind.

Like, it's great that you went into that whole explanation about how markets work, but you're totally missing the bigger picture here. The problem is that a fundamental human need like housing should not be subject to the whims of the market. Housing is not, and can never be, a truly free market, for several reasons:

  • Housing values incentivize NIMBYism: supply shortages increase prices, which encourage people to put in market controls that further restrict supply and increase value
  • The cost of moving is significant, and gives landlords leverage that tenants will never have. It's not just financial impacts, moving can also disrupt children's education, and generally disrupt the feeling of stability and "home".
  • You can't just not buy housing. There are plenty of goods that you can just not buy if they're too expensive. Housing is not one of them.
  • The net result is landlords have so much more power than tenants, which hardly makes it a balanced market to begin with.

I think that markets are a very useful tool that can actually build a lot of housing if we get rid of some of the blockers. But they're not some sort of fundamental law of the universe that cannot be interfered with. And if they're so fragile that even some sort of barely adequate 10% rent increase cap, for instance, will "utterly destroy" them, then maybe there's a bigger problem here.

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relliott22 t1_j7333xf wrote

I'm not arguing for the status quo, or for no government intervention. I think that we should use government policy to subsidize construction. What you seem to be advocating for is socialized housing, which tends to be inefficient. It's hard for central planners to know where to build the right amounts of the right types of housing. Markets allocate these resources much more efficiently. That's why even social democracies in Western Europe still have private housing markets.

I'm trying to get you to understand that imposing price controls exacerbates the problem in the long run by making the supply problem worse. No one wants to supply the demand for rent controlled apartments, so new rent controlled apartments don't get built and existing rent controlled apartments get converted into condos which further decreases supply and makes the problem worse.

Your heart is in the right place, but the solution you're advocating for doesn't work. We see this both in economic theory (if you artificially decrease the price of a good you will artificially decrease the quantity supplied, basic econ 101), and in empirical evidence when we examine places where rent control has been tried.

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Splime t1_j73fru1 wrote

Ok, sounds like we're closer in thinking than I thought then. I think you're underselling socialized housing somewhat - it's definitely less efficient at a smaller scale, but if you need a lot of housing in bulk then that central planning becomes a benefit. I think some combination of both (such as in Austria) could work, but no fully market-based solution is going to cover everyone.

I guess the thing is, I know price controls can make the supply situation worse. I think the impact is overblown - there's still going to be developers who can turn a profit if the controls aren't too onerous, but there is a negative impact. In my opinion though, it's a worthwhile sacrifice in the short term to avoid evictions and displacement.

There's got to be some sort of compromise here, IMO - like, that's why I mentioned 10% (very arbitrarily), it's still above inflation usually, still allows for developer profit, but doesn't allow for insane price hikes all in one go. With enough supply, that kind of rent control would be de facto pointless anyway. The places where rent control failed are usually because they never bothered to actually fix the supply constraints. Maybe artificially lowering the price a little didn't help the supply, but single family zoning and long arbitrary approval processes for multi family housing are a much more significant artificial limit to supply. I don't think it's all or nothing - there's a certain amount of rent control you can get away with if you remove enough supply restrictions, there's got to be some sort of balancing act possible here.

I guess what I'm saying is, the whole concept of rent control shouldn't be written off just because people expect it to "solve housing". It's an often misused tool with some drawbacks, and there are better ways of providing housing stability (such as social housing), but when done properly it can be a net positive. Or put more succinctly, rent control of a private market is probably the worst way to reduce evictions and sudden rent hikes, but it is a way of doing that. And apparently that's the best we can expect from our politicians :/

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relliott22 t1_j73lzrq wrote

Yeah, that's not a ringing endorsement of the policy. And the bill in question simply lets towns and cities impose rent controls at their own discretion. I cannot in good conscience support that bill. It's a bad idea that will make the housing problem in Massachusetts worse with no guarantee that it will have any positive impacts.

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